The Korea Financial Investment Association announced on August 19 that it will establish a new "Delisted Companies Division" within the K-OTC market to improve the trading infrastructure for delisted stocks.
As a follow-up to the "Delisting System Improvement Plan," the association has amended the K-OTC market operating regulations in response to stricter delisting requirements and streamlined procedures. The revised regulations will take effect next year. In accordance with these changes, the association will create the Delisted Companies Division and support trading for six months for companies that have been delisted from the KOSPI and KOSDAQ markets, provided they meet the minimum requirements for investor protection.
The eligible securities are stocks that are delisted on or after January 2 of next year, the effective date of the revised regulations. Stocks designated for the Delisted Companies Division can be traded through securities firms' Home Trading Systems (HTS) and Mobile Trading Systems (MTS) that provide K-OTC brokerage services. The initial trading price will be set at the lower of the closing price on the last trading day before delisting or the arithmetic average of the closing prices on the last three trading days before delisting. The price fluctuation limit will be set at ±30% of the base price.
The designation requirements have been set at a minimum level necessary for investor protection: ▲ An unqualified or qualified (excluding those with scope limitations) audit opinion on the most recent financial statements ▲ No issues with the transfer of shares ▲ No issues affecting the company's continuity, such as bankruptcy.
The association will newly designate eligible stocks to the Delisted Companies Division in the month following their delisting. Companies that do not initially meet the requirements may be designated within one year of delisting if they later prove compliance, subject to review.
In principle, designation will be lifted on the first business day after six months from the initial trading date. However, in cases where investor protection is needed, such as dissolution, the designation may be lifted earlier.
Lee Hwantae, Head of the Industry and Market Division at the Korea Financial Investment Association, stated, "By establishing the Delisted Companies Division, we will provide investors with a safer trading platform for delisted stocks and enhance trading continuity." He added, "We also expect to offer companies an opportunity for recovery, and the association plans to expand the number of securities firms available for trading to ensure convenience for investors."
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